clifford_92FS wrote:I have been reading, or interpreting what I read, about the credit utilization ratio and keep hearing conflicting arguments. I just recently found out about the 30% utilization ratio that you should strive for. I understand that but, I'm confused about when to pay my bill because I've also heard that paying in full (taking your balance to $0) means that credit card companies send a credit utilization ratio of 0% to reporting bureaus.
Whoever said that is wrong. Your utilization is not reported. What is reported is your available credit (limit) and you balance on a particular day. The reporting day has nothing to do with your closing date, due date, or anything else. It will be some random day during the month and it might change. As long as you pay in full by the end of the month you will be in good shape.
clifford_92FS wrote:Here is my situation:
My credit card billing cycle starts/ends on the 22nd. My payment is due the following 17th. So right now I am in a billing cycle that lasts from 11/23/11-12/22/11 with my payment due on 01/17/12. As of the end of the day on the 22nd, my outstanding balance at that time is the balance that is on my statement. This is the balance sent to credit agencies, correct?
If this is the balance used for the credit utilization ratio, my last 5 statements had ratios of 45,45,38,58, and 27%. This balance on my statement, is also the amount that I completely pay before the following 17th, as opposed to only paying the $15 minimum.
Is this balance, the one reported on my statement and sent to the bureaus, the only one that matters? Meaning, I could pay down some of my balance to get below 30% before my cycle ends, or should I never take my balance above 30% even if it's in the middle of the billing cycle. I hope this makes sense. Thank you for reading, and I really am thankful for any help you can provide.
Generally speaking you should never take your balance above 30% of what is available. However, utilization is not a very "durable" factor. If you go to 90% one month then pay everything off you will be back to good credit within a month or two.
The bottom line is, if you keep your usage below 30% and pay responsibly for 6 months or so you limit will likely be raised so that you can spend more and still stay under the 30% limit. Just be patient.